Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2025. The lease agreement called for annual rental payments of$1,307 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $10,00a book value of $8,000, and Blue expects a residual value of $7,500 at the end of the lease term. Blue set the lease payments with thintent of earning a 6% return, though Larkspur is unaware of the rate implicit in the lease and has an incremental borrowing rate of8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not ofspecialized nature.Click here to view factor tables.(For calculation purposes, use 5 decimal places as displayed in the factor table provided.)Your Answer Correct AnswerYour answer is correct.Determine the nature of the lease to both Blue and Larkspur.The lease is a/an operating lease to Larkspur.The lease is a/an operating lease to Blue. (b)Prepare all necessary journal entries for Larkspur in 2025. Larkspur uses straight-line depreciation. (List all debit entriesbefore credit entries. Credit account titles are automatically indented when the amount is entered. Do not indentmanually. Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the accounttitles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)DateAccount Titles and Explanation(To record the lease)(To record lease payment)DebitCredit

As per the given information: Annual lease rental payments - $1,307Period of lease - 3-yearEconomic…

Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2025. The lease agreement called for annual rental payments $1,307 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $10,0 a book value of $8,000, and Blue expects a residual value of $7,500 at the end of the lease term. Blue set the lease payments with intent of earning a 6% return, though Larkspur is unaware of the rate implicit in the lease and has an incremental borrowing rate 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer Correct Answer Your answer is correct. Determine the nature of the lease to both Blue and Larkspur. The lease is a/an operating lease to Larkspur. The lease is a/an operating lease to Blue.

Blue Corporation leased equipment to Larkspur, Inc. on January 1, 2025. The lease agreement called for annual rental payments $1,307 at the beginning of each year of the 3-year lease. The equipment has an economic useful life of 7 years, a fair value of $10,0 a book value of $8,000, and Blue expects a residual value of $7,500 at the end of the lease term. Blue set the lease payments with intent of earning a 6% return, though Larkspur is unaware of the rate implicit in the lease and has an incremental borrowing rate 8%. There is no bargain purchase option, ownership of the lease does not transfer at the end of the lease term, and the asset is not specialized nature. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (a) Your Answer Correct Answer Your answer is correct. Determine the nature of the lease to both Blue and Larkspur. The lease is a/an operating lease to Larkspur. The lease is a/an operating lease to Blue.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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